Burgess v. Lasby

• Decision Date: 25 July 1933
• Docket Number: 7119.,Nos. 7041,s. 7041
• Citation: 94 Mont. 534
• Parties: BURGESS v. LASBY et ux. STATE ex rel. BURGESS v. DISTRICT COURT OF FIRST DIST. IN AND FOR BROADWATER COUNTY et al.
• Court: Montana Supreme Court

94 Mont. 534

BURGESS

v.LASBY et ux.

STATE ex rel. BURGESS

v.DISTRICT COURT OF FIRST DIST. IN AND FOR BROADWATER COUNTY et al.

Nos. 7041, 7119.

Supreme Court of Montana.

June 28, 1933.

As Amended on Denial of Rehearing July 25, 1933.

Appeal from District Court, Broadwater County; O. F. Goddard, Presiding Judge.

Action by Charles N. Burgess against W. D. Lasby and wife. From an order vacating and setting aside order appointing a receiver, plaintiff appeals, and thereafter the State, on the relation of Charles N. Burgess, filed an original application for writ of supervisory control against the District Court of the First District in and for Broadwater County, and O. F. Goddard, Presiding Judge in said court, etc., and the two causes were heard together.

Reversed and remanded, with directions.

E. H. Goodman and Fred W. Schmitz, both of Townsend, and Toomey & McFarland, of Helena, for relator-appellant.

J. R. Wine, of Helena, Frank T. Hooks, of Townsend, and C. A. Spaulding and W. D. Rankin, both of Helena, for respondents W. D. and Marie Lasby.

J. R. Wine, of Helena, Frank T. Hooks, of Townsend, and C. A. Spaulding, of Helena, for other respondents.

CHARLES B. ELWELL, District Judge (sitting in place of MATTHEWS, J., disqualified).

The two above-entitled cases are companion cases arising out of substantially the same facts, and were argued to the court at the same time.

The original action, Charles N. Burgess v. W. D. Lasby and Marie Lasby, was commenced in Broadwater county on January 18, 1924, for the foreclosure of a real estate mortgage given by Marie Lasby and W. D. Lasby, husband and wife, to Charles N. Burgess, to secure the payment of $20,000. There was default in the payment of taxes, because of which failure it is alleged that Burgess elected to declare the entire debt due and to foreclose the mortgage.

The complaint alleges notice to the Lasbys and demand that they pay the taxes, their failure to do so, the payment of such taxes by Burgess, and further alleges that the defendants are not occupying the premises; that the premises are now deserted and abandoned, and, while in that condition, cannot be worked, and that there will be no rents, issues, or profits therefrom, which rents, issues, and profits, under the conditions of the mortgage, immediately accrue to the benefit of the mortgagee upon default, and that, owing to the great depreciation in real estate values and the present condition of the property, the property is probably insufficient to discharge the mortgage debt. It is further alleged that plaintiff is entitled to the immediate benefit of the rents, issues and profits, and is entitled to have a receiver appointed to take possession of the premises immediately and hold them until the sale and account to the plaintiff for the rents, issues, and profits. The prayer of the complaint asks that the decree provide that the plaintiff is entitled to the rents, issues, and profits from and after December 1, 1923, to the date of sale, and further asks that a receiver be appointed to take possession of the premises and hold them until the sale and account to the plaintiff for the rents, issues, and profits.

The complaint is verified positively (except as to matters therein stated on information and belief, of which there are none in the complaint), and a copy of the mortgage is attached to and by reference made a part of the complaint, which mortgage contains a provision that on default all rents and profits of the property shall accrue to the benefit of the mortgagee.

The summons was served on the defendants in Broadwater county by delivering a copy thereof to Marie Lasby and a copy of the summons and complaint to W. D. Lasby. On February 6, 1924, both defendants appeared by demurrer, being represented by Frank T. Hooks, of Townsend, Montana, and William Scallon and J. R. Wine, of Helena, Montana. On February 14, 1924, an order was made by Hon. William L. Ford appointing Chris Bliler as receiver, fixing his bond at $1,500, directing that the rents, issues, and profits be deposited in court from time to time, which order recites that Frank T. Hooks, Esq., appeared in court for the defendants, and that from the complaint and the showing made in open court it appears that the premises are abandoned by the defendants, vacant, and in danger of waste and depreciation, and that they will probably not bring sufficient on sale to satisfy the lien of the plaintiff, and that it is necessary that a receiver be appointed. This order was filed on February 14, 1924, but was not recorded until June 5, 1931.

On September 29, 1930, a motion was made by the defendants to vacate the order appointing a receiver, which was heard by Judge Pomeroy, and on November 24, 1930, he denied the motion. At the time of hearing the motion before Judge Pomeroy the original order appointing the receiver was not before the court, it not being in the files nor recorded, and all that the records showed was the docket entry of February 14, 1924: “Order of Appointment of Receiver,” and two minute entries, one of February 13, 1924: “Plaintiff's motion for appointment of receiver set for hearing on February 14, 1924, at ten o'clock A. M.,” and the other on February 14, 1924: “Plaintiff's motion for appointment of a receiver submitted to the court and granted.”

An appeal from Judge Pomeroy's order denying the motion to vacate the order appointing the receiver was taken to this court, and, after the transcript had been filed, the original order signed by Judge Ford, dated February 14, 1924, was returned to the clerk of the district court of Broadwater county on May 5, 1931, from the office of William Scallon, one of the attorneys of record for the defendants. This original order was sent to this court with a motion that it be considered in determining the appeal, which was done over objection of the defendants, and the order of Judge Pomeroy refusing to vacate and set aside the order appointing a receiver was affirmed, and later a motion for rehearing was denied. Burgess v. Lasby, 91 Mont. 482, 9 P.(2d) 164.

In the meantime, and on February 18, 1924, Chris Bliler filed his bond as receiver, and on February 23, 1924, filed his oath as receiver. He subsequently filed a number of reports of his receivership, most of which, if not all, were served on Frank T. Hooks, attorney for the Lasbys; dates were set for hearing, and all but one were approved. On May 12, 1930, William D. Lasby and Marie Lasby executed and filed with the clerk of court of Broadwater county an assignment of their interest in the funds in the hands of the receiver to Frank T. Hooks and J. R. Wine, their attorneys, to the extent of $1,500, and the balance to Lasby Drug Company, Incorporated, and on October 17, 1930, and just before the hearing before Judge Pomeroy, the Lasbys executed and filed with the clerk of court a further assignment of the funds in the receiver's hands accumulated since the prior assignment. In August, 1930, and before the first hearing, Marie Lasby executed a deed to a strip of the mortgaged land to the state of Montana for a highway, and Burgess and wife executed a like deed. The consideration for the deed was turned over to the receiver for accounting in the receivership.

There is no dispute but that the defendants and at least one of their attorneys, Frank T. Hooks, knew of the purported appointment of the receiver and of his taking charge of the properties and the management thereof, and made no objection. They explained their failure to make objection by the fact that up to the time of the decision of the Supreme Court in the case of Lasby v. Burgess, 88 Mont. 49, 289 P. 1028, rendered March 25, 1930, they had contended that the land did not belong to the Lasbys and were attempting a rescission of the contract by which Burgess sold them the land on which the mortgage was given; and, further, that they took the view that the order appointing the receiver was absolutely void. After the decision of this court in 91 Mont. 482, 9 P.(2d) 164, sustaining the order of Judge Pomeroy, the Hon. O. F. Goddard was called in, and on June 14, 1932, granted leave to the defendants to file an amended and supplemental petition to vacate and set aside the order appointing a receiver, and on June 15, 1932, motion, notice of motion, and supporting affidavits were filed by the defendants. On June 27, 1932, a hearing was held before Judge Goddard, over the objection of the plaintiff, at which considerable testimony was adduced in an attempt to show what actually happened on February 14, 1924, the date of the original order appointing a receiver, and immediately prior thereto. On August 24, 1932, Judge Goddard signed an order vacating and setting aside the order appointing a receiver, ordering $800 to be paid to the receiver as his compensation for services, and directing the clerk of court to pay over to the defendants the balance of said money, which order was filed on August 25, 1932.

What followed the filing of this order and the payment of the money to the defendants and their counsel, and the attempts of the plaintiff to stop the payment thereof and to impound the proceeds, is detailed in the decision of this court in this case in proceedings to impound the receivership funds, dated December 19, 1932, and that of December 21, 1932 (Burgess v. Lasby, 93 Mont. 610, 23 P.(2d) 1100), the latter opinion being substituted for that of December 19, 1932, and which latter decision gave the defendants ten days in which to file affidavits in opposition to plaintiff's motion, impounded the funds and reserved further consideration of the motion to impound the funds, until this hearing. The counter affidavits have been filed.

In the meantime, and on December 20, 1932, an injunction was issued out of this court directed to the defendants, and to C. A. Spaulding, J. R. Wine, Frank T. Hooks, and Joe Lasby, to hold subject to the order of this court the proceeds of...